TJX Touts Strength Of HomeGoods Unit, Awaits Return Of ‘Revenge Shopper’

TJ Maxx HomeGoods

Given that roughly 15 percent, or 690, of TJX Corporation’s off-price retail stores in Europe and Canada are currently still closed due to pandemic restrictions, the Framingham, Massachusetts company’s fourth-quarter results must be taken with a large grain of salt. They are estimated to take about a $1 billion hit to revenues and 20-cents-per-share on the earnings front.

That said, the parent of 4,500 TJ Maxx, Marshall’s and six other brands said sales at its stores that were open last quarter fell just 3 percent to $10.9 billion, which was better than it had expected, while sales at its HomeGoods unit were up 12 percent thanks to the COVID nesting trend. With no less than half a dozen department store chains either in or close to bankruptcy, TJX said it expects to see a lot of good merchandise headed its way, which is critical to drawing in customers.

“We believe we have a tremendous opportunity to capture additional market share, even beyond the prospect of a resurgence in consumer spending and ‘revenge shopping’ once vaccines are widely available,” TJX CEO Ernie Herrman told investors on the company’s earnings call Wednesday (Feb. 24). “We are convinced that our flexible off-price model has structural advantages, with our entertaining and engaging ‘treasure hunt’ shopping experience, a differentiated assortment of branded merchandise and our excellent value.”

The Rebound

While TJX awaits the revenge shopper, it is also putting more money into its hot HomeGoods unit, with plans to nearly double the brand’s store count from 800 to 1,500. It is also belatedly launching its homegoods.com eCommerce business later this year, even as most retail segment leaders have been selling online for more than a decade. The company also said that for the year, HomeGoods accounted for almost 40 percent of total sales, up from 33 percent a year ago, even though it accounts for only about one-fifth of its store count and 15 percent of its square footage.

In addition, TJX said it expects the convenience of its standalone, off-mall locations to be an advantage, as it can reach a wider customer demographic. The company noted that 80 percent of U.S. consumers live within 10 miles of one of its stores. “This makes it very easy for shoppers to visit, and we expect to see incremental traffic once consumers return to their workplaces and go out more, as they will be passing by our stores much more frequently,” Herrman said.

Lots of Company

Like many of its rivals in the apparel and department store categories, TJX is far from out of the woods, and many of the problems it faced before COVID-19 still exist. “The headwinds of freight, wage and supply chain that existed pre-pandemic have not gone away. In fact, each of them has gotten worse in the current environment,” said CFO Scott Goldenberg. “On freight specifically, we continue to see capacity constraints and driver shortages, which has led to higher rates.” Again, just as many of its competitors have said, TJX told investors that it “remained laser-focused on looking for expense savings throughout the business.”

As far as its ‘revenge shopper’ theory goes, TJX is not alone in predicting a surge in post-pandemic consumption. L’Oreal’s CEO recently called for a “roaring 20s rebound” once people can comfortably go out again, and the head of one of the country’s largest shopping mall owners agreed. “We do feel like there’s going to be a lot of revenge shopping and revenge spending,” Kimco Realty CEO Conor Flynn said last week on the company’s earnings call. “I can’t tell you how many conversations I’ve had about what restaurants people are going to go to or what fitness club they’re going to go back to or what trips they’re going to take.”